Oracle's Software Business Stays Strong As Hardware Struggles

Oracle reported its third-quarter revenues today. While there were sunny spots for its bread-and-butter software business, the company is still struggling to grow hardware sales.First the good news: Oracle reported that new software sales rose 6 per cent from the year-ago quarter to $1.6 billion. It posted a first-quarter profit, excluding items, of 53 cents per share which met analyst’s average forecasts. It declared a cash dividend of $0.06 per share, too.

Now the bad news: Hardware sales dropped 24% from the year ago quarter. Oracle had warned investors to expect maybe a 17% decline. Plus, Oracle said that it expects hardware sales to drop 8 to 18 per cent next time.

Oracle says the drop in revenue is because Oracle has been trimming away Sun’s low-margin commodity products to focus on the most profitable pieces. Ellison has a vision of being the “Apple” of the data centre, where it supplies everything, hardware and software, to its customers.

There’s been indications that the turnaround story isn’t quite so straightforward. In June, Oracle parted ways with its top North American sales exec, Keith Block. Block was in the hot seat for a bunch of instant messages and e-mails used in the Oracle/HP trial in which he bashed Sun hardware.

But as long as Oracle’s software business stays strong, it should be able to hang on until it can figure out how to be a hardware success.